Dow Drops 600 Points, Erases 2018 Gains as Target Drags Down

Facebook is down sharply amid backlash for how the company has dealt its handling of the platform's use by foreign entities to disrupt the 2016 U.S. election

By Fred Imbert and Ppriha Srivastava | CNBC •Published March 7, 2018•Updated on November 20, 2018 at 3:45 pm

Drew Angerer/Getty Images, File

The major U.S. stock indexes fell sharply on Tuesday and turned negative for the year as a decline in Target shares pressured retailers, while the most popular tech shares dropped again.

The Dow Jones Industrial Average dropped 606 points and the S&P 500 plunged 2 percent. The Nasdaq Composite also dropped more than 2 percent. The Dow and S&P 500 were up 1.2 percent and 0.6 percent, respectively, for 2018 entering Tuesday. The Nasdaq was up nearly 2 percent for the year.

Stocks hit their lows of the day after Doubleline Capital founder Jeffrey Gundlach said stocks are still too expensive, adding there has not been a "panic low" yet.

The decline sent the SPDR S&P Retail ETF (XRT) down 3.3 percent. Kohl's, L Brands and Macy's — which are also in the XRT — fell 8.8 percent, 17.1 percent and 3.2 percent, respectively. Retail's steep decline comes ahead of the holiday shopping season, a critical period of the year for these companies.

Stocks fell sharply last month amid heightened concerns about rising interest rates, slowing economic growth and global trade tensions. The S&P 500 fell 6.9 percent in October while the Dow lost 5.1 percent of its value. At current levels, the Dow is less than half a percent the closing low during the October sell-off and 1.7 percent from its intraday low hit during the market turmoil last month.

Tuesday's decline came a day after members of the popular "FAANG" trade —Facebook, Amazon, Apple, Netflix and Google-parent Alphabet — all closed in a bear market, down more than 20 percent from their 52-week highs. The S&P 500 and Nasdaq dropped 1.7 percent and 3 percent, respectively, on Monday while the Dow fell 1.6 percent.

Apple has been leading the charge lower for FAANG stocks as investors worry sales for the company's flagship product, the iPhone, will slow down. Most recently, Goldman Sachs slashed its price target on Apple on Tuesday, noting that "in addition to weakness in demand for Apple's products in China ... it also looks like the balance of price and features in the iPhone XR may not have been well-received."

Meanwhile, Facebook is down sharply amid backlash for how the company has dealt its handling of the platform's use by foreign entities to disrupt the 2016 U.S. election.

"Short term, unexpected weakness in the tech sector could have a significant impact on the global economy, adding to what already looks like a soggier macro environment," said Dario Perkins, managing director of global macro at TS Lombard, in a note. "Additional retrenchment in the FAANGs could also undermine the broader US stock market."

FAANG stocks were down again on Tuesday. Facebook was down about half a percent while Amazon and Netflix fell at least 1 percent. Apple shares dropped 5.2 percent.

The major indexes were also under pressure as steep losses in crude pushed down the energy sector. West Texas Intermediate futures plunged nearly 7 percent to $53.21 per barrel on Tuesday amid worries about rising supply across the globe. Crude's plunge sent the S&P 500 energy sector down 3.5 percent, by far the worst-performer in the index.

"A lot of people are getting blown up there," said Larry Benedict, CEO and founder of The Opportunistic Trader. "A lot of people were in this long oil, short natural gas trade that had been working for some time. Now, I think we're seeing some liquidation."

Boeing shares fell 1.5 percent Tuesday after the company canceled a conference call with airlines to discuss the systems on the 737 MAX model. Last month, a 737 MAX crashed and killed all 189 people on board.